Please help me out!

[edward0222]

I am stuck in a hole that I cannot seem to get out of and would appreciate any advice.
I am a 33 year old male, married, with 2 children.
My wife is a homemaker and I make approx $82k a year.
Tax time, we get approx $5k and my bonus is approx $8k.

Bills
Mortgage, 6.675% interest rate, owe $152k. Home is worth approx $105k. Pay $1,500 month.
Second Home Mortgage, owe $12k. Pay $192 month.
Owe my dad $8k since 2006, have paid him $0.00 back.
Cell Phone, approx $150 month
Cable, approx $150 month
Gym, approx $40 month
1 car paid off
1 car $460 month
Car insurance $125 month
Kids school $575 month
Water, $75 month
Gas, $75 month
Electric, $125 month
Groceries, $400 month
Credit Cards
4,500 balance, pay $100 month
7,500 balance, pay $200 month
5,000 balance, pay $145 month
$500 balance, pay $30 month
$700 balance, pay $30 month
$2,000 balance, pay $80 month
$600 balance, pay $25 month
$500 balance, pay $25 month
School Loans
$4,000 balance, pay $100 month
In Sept 2012, after 2 years of deferred payments, I will begin payment $500 month w/ $80k balance


Total payments: $4,400 month
Bring home: $4,400 month

I don’t know what to do, or who to turn to for help. I am one month behind on my mortgage, otherwise, everything else is up to date. My credit and my wife’s credit at this point stinks. In early November 2011, I went to Wells Fargo and asked for home modification and would not approve. I would love to move to something bigger, I know it sounds ridiculous but that’s the plan. I don’t care if we rent but not sure if I should lose the house, claim bankruptcy, or what to do.

Any help is appreciated,

Edward

[photo]

Originally Posted by edward0222

Cell Phone, approx $150 month
Cable, approx $150 month
Gym, approx $40 month

Cable is completely unnecessary and exorbitant in price. You have a very expensive cellphone plan. Unless you use it at least 3 times a week, your gym membership is probably not worth it.

Private schools are expensive. You could save almost $7,000 a year by simply enrolling them in public schools. It also looks like you drive an expensive car. How much longer do you have to pay?

What is the interest rate on all those credit card bills? All of it is money you're throwing away.

I would love to move to something bigger, I know it sounds ridiculous but that’s the plan. I don’t care if we rent but not sure if I should lose the house, claim bankruptcy, or what to do.

The only way to change your financial life for the better is to appreciate what you have and not spend every single penny you have and always want more. If you don't, you'll forever be a slave to credit card bills and never have true freedom.

Hint: throw out a lot of junk in your house, and you'll have a lot more room.

[jpg7n16]

Originally Posted by edward0222

I don’t care if we rent but not sure if I should lose the house, claim bankruptcy, or what to do.

Don't bother with bankruptcy. You make $82k/year, so you may not even qualify for a BK. (SL debt is not bankruptable) Main debt savings would be on the home, but if it comes down to that you could just short sell the home and not have to file. There's only $20k of CC debt.

I'm a firm believer in starting with the largest expenses and working my way down. I'd be willing to bet that evaluating the top 5 expenses will solve 90%+ of all budget problems.

Total expenses listed ($4,602)

Your top 5 expenses:
1 - House debt $1,692 (36.76% of all expenses)
2 - CC debt $635 (13.80%)
3 - Kid's school $575 (12.49%)
4 - Car debt $460 (10.00%)
5 - Groceries $400 (8.69%)

These 5 expenses alone count for 82% of your total spending. The house accounts for as much as #2, 3, and 4 combined. 3 of your top 5 are debt related.


After looking at these numbers, where do you think the problem lies?

What steps can you take to reduce these 5 expenses?

[naomibatac]

I agree with jpg7n16, don't consider bankruptcy even if you qualify. Sometimes, when list down all our payable, we become overwhelmed and lose focus. When this kind of situation happened to us, my husband and I sat down, look at our list and find ways how to have extra income without putting out any money. The first that came to our mind is to get rid of all things that we do not need in our house and those that are duplicated by having a garage sale. We were able to accumulate enough cash to pay for our credit card debts and a portion for house mortgage. We started to do frugal spending and we were able to get back controlling our finances.

[Slug]

I also agree with jpg. I would also ask what your wife is doing while the kids are in school. You cannot afford for her not to work when you have this much debt.

[LivingAlmostLarge]

Is there any possiblity of refinancing the house? It isn't exorbitant for your income. What about the car?

Maybe a second job for your or first job for wife to get the ball rolling?

[LMA]

Edward, you can do this without sending your wife to work and without bankruptcy and/or foreclosure. It all depends how bad you want it.

First and foremost: you are living beyond your means. Look at how much money you owe to your dad and on credit cards. Stop borrowing!

First thing is to caution against sending your wife to work. It sounds she is a at home taking care of children and that is the MOST IMPORTANT job she will ever have. So sending kids to daycare so she can bring in some money might be very counterproductive. However, she could find something to do from the house that does not take away from her motherly duties.

Second your cell phone bill is ridiculous. Switch to cheap cell phones and cut the home phone.

Third, get rid of the cable, period. It's not a necessity and many times is just a waste of your time. Get an antenna and watch the channels over the air.

Fourth, get rid of the gym. Use the $40 to buy a pair of sneakers and go for a run every morning.

Fifth, if you get $5k back at tax time then you are having too much taken out of your paycheck. Adjust your W4 at work and have them take less for taxes so that you get more take home pay in each paycheck.

Sixth, you are going to have to start paying minimum on credit cards and then get rid of the $500 cards. Then move on to the next one and so on.

Seventh, find some part time work on nights/weekends and use that extra money to pay off debt (hey, I did not say it was going to be easy )

Eight, close all those credit cards and don't charge a single more penny to any of them. You have no discipline whatsoever to be using credit

Ninth, get yourself on a written budget and an all cash diet. If you don't have the cash then you don't buy it...if it's not in the budget then you don't buy it.

Your mortgage payment is actually not bad for your income. Your problem is your gross misuse of credit. If you get on a budget, stop borrowing, adjust your expenses and get on a plan YOU CAN DO THIS

[LMA]

Oh, I forgot about the car...with that payment it sounds like a $30k car, correct?

If so, get rid of it and get yourself a nice $5,000 commuter car that you can use to go to work. If it's the family car then see if you can sell the other one, get a cheaper one and then use the money left over to pay towards this car.

[MonkeyMama]

Originally Posted by photo

Cable is completely unnecessary and exorbitant in price. You have a very expensive cellphone plan. Unless you use it at least 3 times a week, your gym membership is probably not worth it.

Private schools are expensive. You could save almost $7,000 a year by simply enrolling them in public schools. It also looks like you drive an expensive car. How much longer do you have to pay?

What is the interest rate on all those credit card bills? All of it is money you're throwing away.

The only way to change your financial life for the better is to appreciate what you have and not spend every single penny you have and always want more. If you don't, you'll forever be a slave to credit card bills and never have true freedom.

Hint: throw out a lot of junk in your house, and you'll have a lot more room.

So agreed with this entire post - says everything I was thinking.

[artwest]

Bankruptcy is not the answer and you should not move into another house until your debt is cleaned up and you have an EF.

You get $5,000 per year tax refund? That should be adjusted to around $200. That frees up $400 per month.

Cut the cable and gym. You can work out at home and basic cable only costs about $30 so just switching to basic should free up another $120.

So far in 2 short paragraphs, we have freed up $560 per month. Sell stuff and throw the $560 (if necessary) that we found to build an EF of at least $1,000, I would prefer $2,000. Once you have your EF in place, start throwing that $560 at your debts smallest to largest. You can knock off a $500 cc in one month which will free up another $30 per month. The month after that pay off the other $500 cc, then the $600 and then the $700 cc. In about 6 months (or less) from now, you should have all of your small cc's paid off and $670 per month available to apply to your next debt.

When you get your bonus, catch up your mortgage and throw the rest at your debt...smallest to largest. This system is called the "Debt Snowball" and it is very effective at paying off debt.

You can do this!

[riverwed070707]

The snowball method is very effective. My favorite site for playing with numbers and seeing how long it will take you to repay your debts is whatsthecost.com.

[YLTL_Dan]

Originally Posted by LMA

Oh, I forgot about the car...with that payment it sounds like a $30k car, correct?

If so, get rid of it and get yourself a nice $5,000 commuter car that you can use to go to work. If it's the family car then see if you can sell the other one, get a cheaper one and then use the money left over to pay towards this car.

Totally agree with the car, it's easy to justify needing an expensive car (it's dependable, we need a big car, etc), but this is definitely killing you. Also, if your paid for car is worth anything, it might be worth selling it and buying a cheaper one as well.

After you clean up your finances (cheaper cable, phone, etc) and sell the car, it's time to take out those pesky credit cards using the debt snowball as previously mentioned (pay off smallest one first - minimum on others and work your way up).

You're overwhelmed because you aren't on a strict budget and your money is just floating away. Get serious and you may even need to take on an evening/weekend job until some of this is cleaned up. You can get through it, and it will be worth it!

[Hector]

Stop borrowing money.
Have a garage sale. Sell things online. Get rid of things that you don’t need.
How much your cars are worth?
How about looking for part time work?
Stop using credit card if you are paying interest on them and start using cash.
If you don’t have it already, develop a strict budget and stick to it.

In addition of these, by doing following simple things you can improve your cash flow by more than $650/month and your lifestyle wont change much as well.
Adjust your W4. --> monthly positive cash flow of $416.67
Cell phone and cable bills are high. One can reduce them easily. Reduce your cell phone play by $50 and cut your cable --> monthly positive cash flow of $210
I might think towards cutting gym and start running outside. --> monthly positive cash flow of $40

[Petunia 100]

Originally Posted by edward0222

I am stuck in a hole that I cannot seem to get out of and would appreciate any advice.

Edward, if you continue on as you are, you're never getting out of your hole, you're only going to get in deeper. Think about it. Do you want to change your financial situation? You can, but only if you are willing to make some changes.

Best of luck to you!

[photo]

Originally Posted by Petunia 100

Edward, if you continue on as you are, you're never getting out of your hole, you're only going to get in deeper. Think about it. Do you want to change your financial situation? You can, but only if you are willing to make some changes.

Let's face it, we're all lazy to various degrees, and many of us would like a big reward for very little sacrifice. However, with finances, it's fairly straightforward. Someone in debt either needs to reduce the debt by spending less or increase the source of money. There are several ways to achieve debt reduction, but all involve action beyond initial desire.